What Does the Trustee Do in Your Bankruptcy?

By Kenneth Lenz, Board Certified Consumer Bankruptcy Attorney
There is nothing to fear from the Trustee as long as you are honest and complete in disclosing your finances.

When you file a Chapter 7 or Chapter 13 bankruptcy case, a Trustee is appointed to administer your case.  This person is an independent contractor who works for the Office of the U.S. Trustee in the Department of Justice, not the Bankruptcy Court. Although Trustees are commonly attorneys, there is no requirement that they be admitted to practice law to do the job.

Administering a case means reviewing the bankruptcy petition and all supporting paperwork filed with the Bankruptcy Court to see that it is properly completed according to the Bankruptcy Code requirements.

The Trustee must conduct an examination of the persons filing bankruptcy to determine background information relevant to the case. The examination will also include production of paperwork documenting the information included on the bankruptcy petition.

In a Chapter 7 case, the Trustee's job is to discover if there are non-exempt assets (items you are not allowed to keep).  The Trustee may recover that property either from the person filing bankruptcy or from others who are holding those items.  Then, that property is sold and the money is used pay the creditors who file a claim with the Court.  The Bankruptcy Trustee gets paid the sum of $90 for every case assigned, plus a percentage of the value of any property that is recovered in the case, as set by Statute.

In a Chapter 13 case, the Trustee's job is determine the proper amount that you can pay each month in a payment plan to your creditors.  Your income and expenses are carefully reviewed so that a proposed plan is realistic and fair.  There, the compensation is a percentage of your monthly payment up to a maximum of 10% of each payment.

Although the process of dealing with the Trustee can be intimidating, there is nothing to fear as long as you are honest and complete in disclosing your finances.